20 Dec 2013

Strength of economy points to March interest rate hike

7:15 am on 20 December 2013

An economist says the strong economic growth in the September quarter cements in the likelihood the Reserve Bank will start hiking interest rates in March.

The figures show the economy grew 1.4% in the September quarter, the fastest pace of growth since the December quarter of 2009, thanks to a surge in dairy production.

The outcome exceeded the Reserve Bank's 1.1% forecast and was higher than most economists were predicting.

Westpac chief economist Dominick Stephens, who had been forecasting a 1.4% outcome, says the central bank is sure to start raising its official cash rate from March.

He says overall economic momentum is a little stronger in 2013 than the Reserve Bank previously allowed for.

Mr Stephens says it will bring the Reserve Bank one step closer to lifting the official cash rate and it firms up expectations that in March next year the official cash rate will rise 25 basis points.

Inadvertent release of trade figures

Other figures the government statistician inadvertently released on Thursday show that, on an annual basis, China is now our top export destination.

China has already been our top annual imports partner since December 2011.

Exports in November rose 17% to $4.5 billion, putting the trade balance in surplus to the tune of $183 million for the month.

Exports to China, of which 63% were dairy products, were valued at a record $774 million.

Imports fell nearly 2.8% to $4.3 billion.

Statistics New Zealand hadn't intended to release the trade figures until January.